In Hillsborough, nobody noticed as school reserves dipped by tens of millions

Hillsborough County school officials failed to track the reserves.

Hillsborough School Board members discuss firing then-superintendent MaryEllen Elia in January. A dip in reserves escaped the notice of the incoming superintendent and seven board members.EVE EDELHEIT | Times

Superintendent MaryEllen Elia speaks to the media after the Hillsborough school board meeting in Tampa on Tuesday, January 20, 2015. During the meeting, the board listened to speakers about whether or not to terminate the contract of Superintendent MaryEllen Elia. They voted to terminate her contract.EVE EDELHEIT | Times

Yet somehow, the fact that tens of millions of dollars were leaving the fund each year escaped the notice of Hillsborough's incoming superintendent and seven elected board members who provide oversight.

Now district leaders are scrambling to cut costs to avoid what could otherwise be a $75 million hit in the coming school year.

Friends and foes of MaryEllen Elia, the superintendent fired in January, are back in their warring camps. The news has hit as two board members who voted to fire Elia — Susan Valdes and Cindy Stuart — face re-election. New York bond rating firms that hold sway over the district's borrowing costs are on high alert.

So who dropped the ball?

Experts around the state say both sides could have done a better job.

"The board is responsible for the budget and all the numbers that are in the budget," said Olga Swinson, chief finance officer for Pasco County schools.

"You need to know what your district is on the hook for," agreed Andrea Messina, executive director of the Florida School Boards Association.

But Messina and others were also surprised Elia and her staff did not spell out for the board what the fund balance — as the reserve is commonly called — looked like year to year.

Linda Lerner, a longtime Pinellas County School Board member, said it's unheard of in her district for fund balances to change under the radar.

"We've had several superintendents," she said. "And our fund balance has always been highlighted by every superintendent. Always."

Elia, now New York's commissioner of education, issued a statement Friday defending her record and blaming her critics on the board for canceling meetings and failing to understand district finances.

"Their lack of accountability is astounding," she said.

• • •

Hillsborough's budget workshops generally begin with a briefing about goings-on in the Legislature and a lesson from chief business officer Gretchen Saunders about how education funding works.

To lighten the mood Saunders hands out candy, sometimes Payday or 100 Grand bars in keeping with the money theme. She takes the board, page by page, through revenue calculations and categories in which money can be spent. Invariably there are complaints around the table about Tallahassee, or talk about the cost of big district initiatives.

Talk of the fund balance happens rarely, if ever.

At one session in 2013, board member Candy Olson quizzed Elia about a federal grant. Was it used, as intended, to buy computers? Or for the ongoing expense of meeting state class size limits, a no-no?

Computers, Elia assured her.

Olson made sure to get her point across. "You have to separate the one-time expenditures … from the ones that, if you choose to spend them, you are committed to spending them forever."

Another discussion about the fund balance happened that same year, when the board rejected Elia's plan to put an armed guard in every elementary school. Some members voted no to protect the fund.

And at a workshop this year, member April Griffin asked about an issue Eakins suspects is a big part of the problem — Empowering Effective Teachers, a showcase program that got a seven-year grant from the Bill & Melinda Gates Foundation.

With that grant about to expire, Griffin said, "we're getting ready to hit that cliff." Plans were made to discuss the issue in a future workshop, but that meeting was rescheduled. The discussion never happened.

• • •

The Tampa Bay Times questioned Stuart, Griffin and Valdes about the issue because they were the most openly suspicious of Elia's management. Griffin tried twice to get backing for an independent auditor. Valdes questioned Elia on unsigned contracts and other financial issues.

Given those doubts, why didn't they track the fund balance? And why vote yes on the budget?

Stuart, who at times voted against individual expenditures, pointed out that the yearly budget is really a forecast of what district officials think they will spend, and receive in taxes.

Valdes recalls casting a protest vote against the budget years ago. In hindsight, she said she wishes she had done so more often.

Valdes and Griffin said part of the problem was terminology. When they asked about the reserve, they were always assured it was safe — which meant the district had well over the $95 million it needed to meet a month of payroll in an emergency, and more than the thresholds set by law.

"It sounds like a (bad) excuse," Valdes said. "But it was like a big shell game. I was always asking, 'What bucket of money is this coming from?' "

Griffin said the board relied on staff to provide accurate information. "In looking back at the financials, it appears that they used a different term than the board was using," she said. "So it was an error of semantics and we should have caught it and stopped it at the time."

Saunders said she was never forbidden from highlighting the fund balance at workshops. But it wasn't a custom in Hillsborough, so she never did.

"Not that I am making excuses," she said. "I'm as much at fault. … This is killing me."

Money flows in and out of the reserve fund throughout the year, making comparisons difficult. At $229 million in 2014, "the fund looked very healthy," Eakins said.

Without tracking movement over time, it would have been difficult-to-impossible to notice a problem. And the approximately $70 million withdrawn this year likely paid for teachers raises that cost more than anyone expected.

"I don't think anyone should be feeling embarrassed because there were a lot of things that were unknown throughout the district," Eakins said. He agreed there was not nearly enough transparency in the old system. He vowed to change that with Saunders' help.

"I absolutely have confidence in Gretchen," he said.

• • •

Dave "Watchdog" Miner is a Manatee County attorney known for questioning school officials. Now he's on the School Board.

Like others, he is incredulous at the Hillsborough mess. "Criticism is justified in hindsight," he said. "Not just board members, but high-ranking staff had very easy access to this information."

The media didn't notice the fund balance changes either, he said. Nor, apparently, did anybody in the community.

He's convinced a major reason for the breakdown was poor communication between the superintendent and half her board — a situation Hillsborough leaders say they've put behind them.

"We likely will find more irregularities as we move forward," said Griffin. "As we do, we need to resolve the issues quickly and stay focused on providing the best possible education for our kids."